BAE Systems

The longest line at the Farnborough International Airshow this week was for a model aircraft. In the absence of the F-35 Lightning, the colossally expensive and accident-prone stealth fighter that was scheduled to be the show’s highlight before an engine failed on a test aircraft, Lockheed Martin brought a replica.

Since the dire implications of Mr Albanese’s decision to push through the Alcan purchase at the top of the market in 2007 became clear, people had been saying his days were numbered. “I expect him to be out within 12 months,” was the rash prediction of one unnamed investor in 2009. Read more

Ian King and Dick Olver, respectively chief executive and chairman of BAE Systems, are in for a rough ride now the planned deal with EADS has collapsed. When merger plans fall through, the people in the top jobs are always vulnerable. But recent experience suggests Mr King’s future is more secure than Mr Olver’s.

Take a look at a handful of recent abortive transactions – G4S’s takeover of ISS in the support services sector, the tie-up between miners BHP Billiton and Rio Tinto (or, if you prefer, the uncompleted deal between Rio Tinto and Chinalco), the proposed merger of Prudential, the UK insurer, and AIA. The chief executives of all the companies involved are still in position, even though some (Nick Buckles of G4S, I’m talking about you) have suffered further setbacks since their favourite tie-ups unravelled. Read more

The takeover of BAE Systems by EADS to create the biggest European civil and defence aerospace company was always a hard sell to its political and financial shareholders. It is starting to look out of reach.

“National interests in the sphere of strategic-level business have all but disappeared,” claims a senior executive of EADS in a new book. But the opinion of Lutz Bertling, chief executive of the group’s Eurocopter subsidiary, is now being tested in battle, as national governments wrangle over what a merger between EADS and BAE Systems would look like.

To be fair, the German executive’s chapter – “Commercial Top Strategic Leadership: A Helicopter View” – was written before the EADS-BAE talks became public. But the question of how Mr Bertling’s personal views might apply to the aerospace and defence merger was raised at Thursday’s launch of In Business and Battle, a “cross-cultural, cross-sectoral and international” anthology of insights into strategic military and civilian leadership. The discussion at London’s Royal College of Defence Studies – where Mr Bertling first presented his ideas – was non-attributable. But as one of the distinguished guests said: “Consolidation is right, but whether this is the particular merger that should be backed is still open to some debate.” Read more

Shareholders in BAE Systems and EADS should know what they’re getting into. The FT’s Alison Smith laid out the governance pitfalls on Friday, and Steven Davidoff has pointed out for the New York Times’ Dealbook that setting up a dual-listed structure requires an “unbelievably complex set of agreements in which [the companies] agree to equalise their shares, run their operations collectively and share equally in profits, losses, dividends and any liquidation”.

But a picture is worth a thousand words, so here are three illustrations of the full horror of some dual-listed structures. Expect EADS-BAE, with the added political and defence ingredients, to be 100 times more complex. Nice work for investment bankers, corporate lawyers and company secretaries; hard work for everyone else.

1. This classic describes the consequences of Reuters’ 2008 merger with Thomson Corporation (from the 545-page prospectus that one investor likened to War and Peace). Easy to see why the Anglo-Canadian DLC ended up abandoning its London listing in 2009:

ABOUT THE AUTHORS

John Gapper is an associate editor and the chief business commentator of the FT.
He has worked for the FT since 1987, covering labour relations, banking and the media. He is co-author, with Nicholas Denton, of 'All That Glitters', an account of the collapse of Barings in 1995.

Andrew Hill is an associate editor and the management editor of the FT. He is a former City editor, financial editor, comment and analysis editor, New York bureau chief, foreign news editor and correspondent in Brussels and Milan.

Emma Jacobs is a features writer for the FT, with a particular focus on Business Life. She explores workplace trends, business culture and entrepreneurship and is one of the paper's leading interviewers.

Adam Jones is editor of Business Life, home to the FT's coverage of management, entrepreneurship and working life.

Lucy Kellaway is an Associate Editor and management columnist of the FT. For the past 15 years her weekly Monday column has poked fun at management fads and jargon and celebrated the ups and downs of office life.

Ravi Mattu is the deputy editor of the FT Weekend Magazine and a former editor of Business Life. He writes about management, technology, entrepreneurship andinnovation.

Michael Skapinker is an assistant editor and editor of the FT’s special reports. A former management editor of the FT, his column on Business and Society appears every Thursday.